Evolution of the business: Joint venture provides entry into the world of sports finance

One of the least known aspects of CAA Sports’ growing influence is a joint venture the agency formed in 2008 that has put it in the middle of some of the biggest financial deals in sports in recent years.

Evolution Media Capital has advised on more than $15 billion dollars of transactions in less than four years. It advised the Pac-10 Conference on its expansion to become the Pac-12, as well as its negotiation of deals with ESPN and Fox to create the Pac-12 Network, which will launch this summer. EMC also was the buy-side adviser to the investment group headed up by Chuck Greenberg and Nolan Ryan when they bought the Texas Rangers in 2010. (Greenberg left the Rangers last year.)

Chuck Greenberg (left) and Nolan Ryan used EMC when they bought the Rangers.Photo by: NEWSCOM

EMC was born when Rick Hess, who worked for CAA as a film finance agent, and Robert Stanley, the former head of Merrill Lynch’s sports and entertainment structured finance group — who had worked together for years, mostly on large film transactions — saw that there was an opportunity to create an investment bank to serve sports and entertainment clients.

“We saw an opening in the market for a boutique investment bank that specialized in sports and media and entertainment,” Stanley said. “There was a real need for it. There were not a lot of players and there were a lot of good transactions.”

Stanley and Hess today are co-founders and co-managing partners of EMC.

EMC operates as a separate entity from CAA, and no one from EMC or CAA would comment on the size of the agency’s equity stake in the company. EMC is run out of CAA’s offices in New York and Los Angeles and is there to provide investment banking services to both CAA’s sports and entertainment clients as well as to provide services to its own clients.

Among its competitors are investment banking firms Allen & Co., Goldman Sachs and Game Plan LLC.

CAA Sports co-head Howard Nuchow said the company saw early on the advantage of such a division. “It became obvious to CAA that clients from across the agency could benefit from having the resources of an investment bank,” he said. “Because we are not investment bankers … CAA went out and thought strategically: It’s a good fit if we created one with the existing investment bankers.”

While Hess declined to identify what he said were EMC’s “dozens and dozens” of clients, he said those in the sports world were evenly split between teams, leagues and sports team owners — either current or prospective owners.

EMC has grown from having five executives when it launched in June 2008 to now having 20. One of its senior advisers is former MLB President Bob DuPuy, now a partner at Foley & Lardner, who joined in February 2011.

“We use a phrase, ‘banking plus,’” said Alan Gold, who heads up EMC’s media advisory in sports. “The normal banking engagement is in terms of the M&A, but we were able to bring the ‘plus,’ which is not only the media advisory and negotiation, but also advisory in terms of the property sales and other stuff — which is in conjunction with [CAA Sports].”

One of EMC’s first sports clients that became known was the investment group led by Greenberg and Ryan. EMC subsequently negotiated a new TV deal for the Rangers, a regional sports network agreement valued at a reported $1.6 billion over 20 years, the largest such deal in MLB history when it was completed in 2010.

“It proved the thesis that by aggregating all the relationships and knowledge that is shared by all of the partners — between EMC, CAA and the executives of all the companies — by pooling all that intellectual capital, we would be able to deliver for all of our clients,” Hess said. “Our understanding of the media marketplace coupled with the fact we were able to help them raise the capital is something investment advisers didn’t do.”

Targeting prospective sports team owners will likely continue to be a robust business for the group.

“I think there continues to be a very big appetite for high-net-worth individuals to buy sports teams because, ultimately, there is a limited number of teams,” Gold said. “And the teams don’t trade that often, so when they do become available, there is usually a good-sized list of people who want to buy sports teams across all the different sports leagues.”

As for the future, the company is expanding its horizons internationally. Stanley said EMC recently did a joint venture with a Latin American media company. Gold noted an active engagement with deals in South America and Europe, as well.

Additionally, Gold said, EMC is advising at least one other college conference, but in typical EMC fashion, details were limited. When pressed about how many other college conferences EMC is advising, Gold’s response: “More than zero.”

“Our business continues to grow in all areas,” he said. “We are expanding, not only in terms of staffing, but in terms of areas of doing business.”